8. Brand Extensions.ppt

Brand Extensions and Naming New Products Brand Extensions Chapter 8 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Learning Objectives Define the different types of brand extensions List the main advantages and disadvantages of brand exte...

Brand Extensions and Naming New Products Brand Extensions Chapter 8 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Learning Objectives Define the different types of brand extensions List the main advantages and disadvantages of brand extensions Summarize how consumers evaluate extensions and how extensions contribute to parent brand equity Outline the key assumptions and success criteria for brand extensions Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  New Products and Brand Extensions Brand extension: When a firm uses an established brand name to introduce a new product Line extension - Adds a different variety, a different form or size, or a different application for the brand Category extension - Marketers apply the parent brand to enter a different product category from the one it currently serves Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Strategy of Brand Extension The strategy behind a brand extension is to use the company's already established brand equity to help it launch its newest product. The company relies on the brand loyalty of its current customers, which it hopes will make them more receptive to new offerings from the same brand. If successful, a brand extension can help a company reach new demographics, expand its customer base, increase sales, and boost overall profit margins. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Important of Brand Extension Brand extension is the introduction of a new product that relies on the name and reputation of an established product. Brand extension works when the original and new products share a common quality or characteristic that the consumer can immediately identify. Brand extension fails when the new product is unrelated to the original, is seen as a mismatch, or even creates a negative association. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Important of Brand Extension 2 Companies that are able to successfully extend their brand are often said to benefit from the halo effect, which allows them to capitalize on the positive perception consumers have of their products to launch new products. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  What Is the Halo Effect? he halo effect is a term for a consumer's favoritism toward a line of products due to positive experiences with other products by this maker. The halo effect is correlated to brand strength, brand loyalty, and contributes to brand equity. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  How Brand Extension Works A brand extension leverages the reputation, popularity, and brand loyalty associated with a well-known product to launch a new product. To be successful, there must be a logical association between the original product and the new item. A weak or nonexistent association can result in the opposite effect, brand dilution. This can even harm the parent brand. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  How Brand Extension Works 2 Successful brand extensions allow companies to diversify their offerings and increase market share. They can give the company a competitive advantage over its rivals that don't offer similar products. The existing brand serves as an effective and inexpensive marketing tool for the new product. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Example Brand extension can be as obvious as offering the original product in a new form. For example, the Al Baik restaurant chain launched a AlBaik (Arabic:‫ )ا لبيك‬is a Saudi fast food restaurant chain Saudi Arabia that primarily sells broasted and fried chicken with a variety of sauces. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Advantages of Extensions Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Facilitate New-Product Acceptance Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Provide Feedback Benefits to the Parent Brand Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Disadvantages of Brand Extensions Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Understanding How Consumers Evaluate Brand Extensions Managerial assumptions Brand extensions and brand equity Vertical brand extensions Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Managerial Assumptions Consumers have some awareness of and positive associations about the parent brand in memory At least some of these positive associations will be evoked by the brand extension Negative associations are not transferred from the parent brand Negative associations are not created by the brand extension Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Brand Extensions and Brand Equity Creating extension equity Contributing to parent brand equity Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Vertical Brand Extensions Pros and cons Examples Naming strategies Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  Evaluating Brand Extension Opportunities Define actual and desired consumer knowledge about the brand Identify possible extension candidates Evaluate the potential of the extension candidate Design marketing programs to launch extension Evaluate extension success and effects on parent brand equity Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Figure 12.7 - Brand Extension Guidelines Based on Academic Research Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  To Sum Up… Brand extensions occur when a firm uses an established brand name to introduce a new product The basic assumption behind brand extension Consumers have some awareness of and positive associations about the parent brand in memory Brand extension will evoke atleast some of these associations Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.  To Sum Up... The extension’s ability to establish its own equity will depend on: Salience of consumers’ associations with the parent brand How compelling and relevant is the evidence about the corresponding attribute How strong consumers’ existing attribute or benefit associations are for the parent brand To evaluate brand extension opportunities, marketers need to consider strategies by applying managerial judgment and consumer research Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.